Nearly 1 in 8 U.S. hospitals owned by private equity firms, watchdog says
A single health system acquisition has shifted statistical data on how many U.S. hospitals are owned by private equity, an industry watchdog revealed on Friday.
According to the Private Equity Stakeholder Project (PESP)—a Chicago-based nonprofit that keeps a regularly updated tracker on investment firm activity in healthcare—nearly one in eight privately owned hospitals in America (11.9%) are now owned by private equity groups, with the head count rising significantly since July.
At that time, according to PESP’s data, 9.5% of privately owned hospitals in the U.S. were under the ownership of hedge funds or investors, equating to 447 facilities nationwide.
Now only a few months later, the number stands at 561—in large part because of the $3.9 billion buyout of Select Medical, a system of rehabilitation and long-term acute care hospitals that operates over 100 facilities in dozens of states across the country.
Select Medical was purchased by a group of private equity firms—namely Welsh, Carson, Anderson & Stowe—in late June, according to an announcement released at the time.
PESP said the buyout, and resulting rise in the statistical ownership share of hospitals linked to investment firms, signals that private equity moneymakers are still interested in making buys in the space.
The group called on regulators to remain vigilant.
“Anyone who thinks private equity is done buying hospitals should think again,” Jim Baker, executive director of PESP, said in a statement. “The industry is still placing multi-billion-dollar bets on hospitals, even after the devastating failures at systems like Steward Health Care, and Prospect Medical Holdings/Crozer Health.”
“Patients and healthcare workers are the ones who suffer when those bets go wrong, and policymakers need to take that risk seriously.”
Real estate assets in focus
In the downfall of Steward Health Care, a central issue was its leasing arrangement, a real estate investment trust (REIT) operated by Medical Properties Trust (MPT), a healthcare-focused firm that owned hospital properties.
In 2016, Steward sold its facilities to MPT, which then leased them back at a premium, ultimately contributing to the bankruptcy of the health system.
PESP said its tracker monitors the “complex ownership arrangements” of private equity-backed hospitals, including those owned by REIT groups. As of October, 144 hospitals owned by investors use such arrangements, according to the watchdog’s data.
Many others (23%) operate through joint venture agreements, where hedge funds and investors share ownership with nonprofit health systems, PESP added.
“With a new Congress and new state legislators taking office post-midterms, the continued acquisition of hospitals by private equity firms underscores the need for lawmakers to address hospital ownership transparency and oversight of transactions that can affect healthcare access and quality,” the group wrote in a statement.
PESP’s Private Equity Hospital Tracker can be found by clicking here.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.